Out-Law News 1 min. read
20 Aug 2018, 2:20 pm
Standard Chartered’s Europe and Americas chief executive Tracy Clarke told the Press Association that the European Banking Authority (EBA) and European Central Bank (ECB) had delayed approval of a licence to turn its Frankfurt branch into a subsidiary.
Last year the ECB said banks wishing to operate in the euro area after Brexit had to have “substance locally”, and could not be “empty shells or letter box banks”.
According to press reports, Clarke said: “Because we were one of the first [to apply for a licence] there was no precedent for us, or for them. It’s been a learning process on both sides.”
Clarke said that the regulators were “getting firmer about what they expect to see, and their stance is therefore becoming a bit tougher”.
Clarke said banks with significant EU operations could find themselves moving hundreds of jobs out of London to cities such as Paris and Frankfurt. She said the impact on Standard Chartered would be relatively minimal.
“For us, it still won’t be hundreds more people because of the size and scale of our business, so you might be talking about a few more for us,” Clarke said. “But if they’re taking this approach with all other banks who are much bigger than we are in terms of their European business, that could be more significant.”
The ECB has said it will focus on five key areas when it was assessing licence applications, including making sure banks’ subsidiaries had adequate local management capabilities, access to financial market infrastructure, and some hedging and trading capability, and were able to provide accurate data on local activities.
In June the EBA called on financial regulators and financial institutions to speed up their preparations for Brexit. The EBA said its monitoring of regulators’ contingency planning showed that financial institutions were not ready for a ‘no deal’ scenario.
Banking expert Tony Anderson of Pinsent Masons, the law firm behind Out-Law.com, said in response to the EBA’s assessment that banks were finding it difficult to prepare for Brexit as they did not know what the final deal would look like.
“It is accepted that there are steps that banks and other participants can and are taking to maintain access to financial markets infrastructure, as correctly noted by the EBA. However, in some instances it is the actual operators of key financial markets infrastructure who are struggling to adapt to a scenario without precedent,” Anderson said.